Can Failure Be Good?

Life Span: 1999-1999
Cause of Death: Inability to convert online services into profitable revenue stream
Subsequent Venture: StartUpAgent Inc. , launched in 2000
Vitals: Projects revenues near $1 million for 2001, with team of 12 employees and contractors

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John Doffing, 31, wrote the original business plan for while he was a graduate student at Cambridge University in 1994. Five years later, during the height of the Internet bubble, Doffing, the founding CEO, and four partners officially incorporated "Our goal was nothing less than to transform the art world through the Internet!" Doffing reflects. Their vision was to create an online art gallery to provide an unprecedented way for emerging artists to expose their work to a global audience. PlanetArts would make money by collecting "slotting fees" from the artists.

But it didn't happen. Just months after launch, ceased operations.

Why did PlanetArts fail? As Doffing points out, it's hard to make much money when your paying customers-"starving artists"-don't have the money to pay you. "We entered a crowded, undefined market with no viable path to monetizing traffic," Doffing laments. "In retrospect, we were probably a bit idealistic."

What lessons did Doffing come away with? Here are three:

1. Make sure your target customer not only has the need for your product, but can also afford to pay you for it.

2. Target a big enough market to make it worth your while.

3. Design a clear-cut revenue model to make money from that market.

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"From the PlanetArts experience," says Doffing, "I think I definitely learned the value of building a company upon a legitimate business need that can be viably monetized."

The following year, Doffing launched his current venture, StartUpAgent Inc., an upstart recruiting agency in San Francisco that specializes in building teams for high-growth tech companies in San Francisco, Silicon Valley and Los Angeles. Despite the recent market downturn, Doffing has grown the company from one person to a team of 12, with revenues projected to reach $1 million for 2001.

How has the PlanetArts failure impacted his current success? "StartUpAgent has been profitable, literally from the first week," says Doffing. "And the business model is decidedly straightforward, [unlike PlanetArts]. We connect great people with great early-stage companies, and we charge for it! In several ways, StartUpAgent owes at least a portion of it success to the failure of Planet Arts."

Work out the kinks of your start-up before you open for business with Start Your Own Business by Rieva Lesonsky and the staff of Entrepreneur.

Sean M. Lyden is the principal and senior writer of The Professional Writing Firm Inc., a Kennesaw, Georgia, company that specializes in ghostwriting articles.

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Sean Lyden is the CEO of Prestige Positioning (a service of The Professional Writing Firm Inc.), an Atlanta-based firm that "positions" clients as leading experts in their field-through ghost-written articles and books for publication. Clients include Morgan Stanley, IFG Securities, SunTrust Service Corp. and several professional advisory and management consulting firms nationwide.

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This article was originally published in the September 2001 print edition of Entrepreneur with the headline: Can Failure Be Good?.

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